Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

Debtors, William M. "Trip" Hawkins - the cofounder of EA and his wife, filed a declaratory action against the IRS and the FTB seeking a determination that their unpaid taxes were covered by the bankruptcy plan discharge. The IRS and FTB counterclaimed, alleging that the tax debts were excepted from discharge under 11 U.S.C. 523(a)(1)(c). The district court and the bankruptcy court held that specific intent to evade taxes was not required in order to except a tax debt from discharge under section 523(a)(1)(C) and the courts relied in large part on debtors' spending beyond their income as the basis for denying tax debt discharge. The court held that the denial of discharge for willfully attempting, in any manner to evade or defeat a tax debt requires that the acts be taken with the specific intent to evade the tax. In this case, neither the district court nor the bankruptcy court had the benefit of the court's holding and therefore, the court vacated and remanded for the courts to reanalyze the case using a specific intent standard.View "Hawkins v. FTB" on Justia Law

This appeal stemmed from debtor's listing of a $575 payday loan from CIC. Debtor filed a motion for sanctions in the Bankruptcy Court, alleging that CIC willfully violated the automatic stay provision of the bankruptcy code, 11 U.S.C. 362, and seeking a return of the funds and overdraft fees, emotional distress and punitive damages, and attorneys' fees. On appeal, CIC challenged the district court's emotional distress and punitive damages awards, and debtor cross-appealed the attorneys' fees and sanctions rulings. The court concluded that the district court did not err in confirming the emotional distress award where debtor suffered significant and emotional distress as a result of CIC's actions in cashing the check and in continuing to call her post-petition. The award of punitive damages was not an abuse of discretion where the bankruptcy court reasonably concluded that CIC demonstrated reckless and callous disregard for the law. The court held that a bankruptcy petitioner, such as debtor, could collect attorneys' fees incurred litigating the violation of an automatic stay after the violator sends an e-mail conditionally offering partial reimbursement under section 362(k)(1) where the bankruptcy laws do not permit a stay violator to undermine the remedies available under section 362(k) by forcing a bankruptcy petitioner to accept a conditional offer in lieu of pursuing fair compensation and attorney's fees. Finally, the district court did not abuse its discretion in denying sanctions under its inherent authority when it declined to find that CIC acted in bad faith. View "In re: Snowden" on Justia Law

The Debtors were account holders at Wells Fargo. When Wells Fargo discovered that the Debtors had filed a voluntary Chapter 7 bankruptcy petition, it placed a “temporary administrative pledge” on their accounts and requested instructions from the Chapter 7 trustee regarding the distribution of account funds, a portion of which the Debtors claimed as exempt under Nevada Revised Statutes 21.090(1)(g). The Debtors brought an adversary proceeding, which the bankruptcy court dismissed. The district court affirmed, holding that they did not state a claim for a willful violation of 11 U.S.C. 362(a)(3), which prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.” Before the account funds revested in the Debtors, they remained estate property, and the Debtors had no right to possess or control them. The administrative pledge could cause the Debtors no injury before the account funds revested. After the account funds revested in the Debtors, they lost their status as estate property and thus were no longer subject to section 362(a)(3). View "In re: Mwangi" on Justia Law

In this fraudulent conveyance action, Linda Mastro, a nonclaimant to the bankruptcy estate, appealed the district court's judgment. The court held that the bankruptcy court had authority to enter judgment based on the parties' consent. However, the court concluded that the district court erred as a matter of law when it determined that the fugitive disentitlement doctrine applied to Linda's civil bankruptcy appeal; the district court's dismissal of Linda's civil bankruptcy appeal was based solely on Linda's blatant disregard for the authority of the judicial system; but disregard for the authority of a different court does not constitute a "necessity" capable of justifying the rule of disentitlement in these circumstances; the court declined to consider the merits of Linda's appeal in the first instance where the district court dismissed the bankruptcy appeal without reaching the merits; and therefore, the court reversed and remanded with instructions.View "Mastro v. Rigby, Jr." on Justia Law

Plaintiffs commenced this action against their attorney and his law firm in state court for legal malpractice, alleging that the attorney was negligent in the performance of his duties as counsel to the unsecured creditors' committee. At issue was whether the bankruptcy court properly exercised jurisdiction over the malpractice action for the committee and correctly dismissed the claim. The court concluded that the district court properly concluded that the bankruptcy court had jurisdiction over the removed legal malpractice action because it was a core proceeding. In this case, the employment of the attorney was approved by the bankruptcy court and was governed by 11 U.S.C. 1103; the attorney's duties pertained solely to the administration of the bankruptcy estate; and the claim asserted by plaintiffs was based solely on acts that occurred in the administration of the estate. The court also concluded that the district court correctly concluded that the bankruptcy court did not err in dismissing the complaint because the attorney did not owe an individual duty of care. Therefore, the court affirmed the district court's dismissal of the case on the merits. View "Schultze, et al. v. Chandler, Sr., et al." on Justia Law

The Diaz Defendants challenged the bankruptcy court's and district court's orders invalidating the transfer to them of a Mexican coastal villa owned by debtors and requiring them to convey the property to Kismet for the benefit of debtors' bankruptcy estate. The court concluded that, notwithstanding the local action doctrine, 28 U.S.C. 1334(e) granted the bankruptcy court exclusive in rem jurisdiction over the Villa interest; given the court's ruling that H&G was debtors' alter ego and its substantive consolidation of H&G with the bankruptcy estate, the Villa interest was property of the estate as of the petition date; the bankruptcy court properly declined to honor the forum selection clauses in the Mexican contracts and declined to abstain from ordering recovery of the property based on international comity; Mexico was not a necessary party and the bankruptcy court could enter judgment without Mexico; the bankruptcy court properly applied U.S. law rather than Mexican law; and the bankruptcy properly found that Martha Barba de la Torre purchased the property in bad faith. Accordingly, the court affirmed the bankruptcy court's judgment with respect to the postpetition transfer action; the fraudulent conveyance action is moot as a result; and the district court granted Kismet's and the Diaz Defendants' requests for judicial notice. View "In re: Icenhower" on Justia Law

This appeal arose from contempt sanctions issued by the bankruptcy court against the Diazes for failing to transfer a Mexican coastal villa to Kismet. The court concluded that: (1) the bankruptcy court had jurisdiction to substitute Axolotl as transferee; (2) the bankruptcy court did not violate due process in imposing certain sanctions; (3) the ACJ was sufficiently specific to support a finding of contempt; (4) even if "legal impossibility" excused noncompliance, the Diazes have not demonstrated that compliance with the ACJ was legally impossible; (5) the bankruptcy court's findings of contempt for the period up to November 25 were not clearly erroneous; (6) the Diazes' claim that the bankruptcy court lacked jurisdiction to quantify fees and costs in its order of December 18, 2008 was moot where the order was vacated by the district court; and (7) the bankruptcy court properly abrogated attorney-client privilege where Mr. Diaz implicitly waived privilege with regard to communications on certain subjects. The court also concluded that the district court did not err in vacating the compulsory sanctions of $25,000 per day for the period from November 26, 2008 to December 4, 2008. Finally, the court granted requests for judicial notice. Accordingly, the court affirmed the judgment of the district court. View "In re: Icenhower" on Justia Law

Debtor sought attorneys' fees incurred in defense of ASC's appeal of the bankruptcy court's determination that ASC had violated the automatic stay. The court concluded that, because debtor was not pursuing a damages award, but rather defending ASC's appeal of a previous finding of stay violation and thereby "remedying the stay violation," Sternberg v. Johnson did not prohibit the awarding of attorneys' fees at issue here. Accordingly, the court affirmed the bankruptcy appellate panel's reversal and remand of the bankruptcy court's decision denying debtor's request for an award of attorneys' fees. View "In re: Schwartz-Tallard" on Justia Law

Defendant appealed the district court's order denying the parties' joint request to seal the entire record of bankruptcy proceedings before the district court. The parties sought to seal the record of proceedings on an interlocutory appeal taken from the bankruptcy court, which the district court dismissed for lack of jurisdiction. The district court rejected the parties' argument that the "good cause" standard applied and held that the "compelling reasons" standard governed the decision to seal the record of the proceedings. The court agreed, concluding that the rationale for the "good cause" standard did not apply in this case and that the district court properly invoked the "compelling reasons" standard in considering the sealing request. In this case, the only reasons provided for sealing the records - to avoid embarrassment or annoyance to defendant and to prevent an undue burden on his professional endeavors - were not "compelling," particularly because the proceedings had been a matter of public record since at least 2004. Defendant has not pointed to any compelling reasons that overcome the strong presumption in favor of maintaining public access to court records. Accordingly, the court affirmed the judgment of the district court. View "Oliner v. Kontrabecki" on Justia Law

Plaintiff claimed that the judge who presided over the administration of the Yellowstone Mountain Club ski resort's bankruptcy was biased against him and should have recused himself. The bankruptcy judge denied the recusal motion and the district court affirmed. The court rejected plaintiff's claim that the judge made ex part communications; the rulings made by the judge purportedly denied plaintiff due process; and the judge made supposed biased statements during various proceedings. Plaintiff's claims were a transparent attempt to wriggle out of an unfavorable decision by smearing the reputation of the judge who made it. Accordingly, the court affirmed the denial of the recusal motion. View "Blixseth v. Yellowstone Mountain Club, LLC, et al." on Justia Law